As a result, ABF is closing its Twinings facility in North Shields next September and significantly reducing the headcount at its Andover site next spring – although the latter site will benefit from a £6m investment.
The move has proved particularly controversial as Twinings has received around £10m in European Regional Development Fund support for the Polish factory, which bosses says is being spent on research and development in new blending and packing technologies for premium tea.
‘Particularly encouraging’ progress at Twinings
ABF, which posted a 26% rise in pre-tax profit to £825m on sales up 10% to £10.2bn in the year to September 18, reported strong growth in grocery, sugar and ingredients, but warned that higher wheat prices would put pressure on bakery margins.
There had been “particularly encouraging progress for Twinings in North America and the UK”, it added. “Advertising expenditure was increased with television campaigns in support of infusions in the UK, and Chai and flavoured black teas in the US.
“In France we launched Twinings Fresh, an innovative cold-infused teabag that has been well received by the market, and in Australia, speciality teas, green tea and infusions all performed well.”
A resurgence in home-baking drove volume growth at Silver Spoon (sugar) and Allinson (flour), while a much-improved performance from Jordans Country Crisp and a strong second half for Ryvita were the main drivers of a “significantly better year for Jordans Ryvita”, said the firm.
As announced in May, the Ryvita factory in Stockport would close with production transferring to Poole, Dorset next year, it added.
Sugar: sales up 32%, profits up 43%
The performance of the sugar division improved substantially during the year with sales up by 32% primarily as a result of a full year's sales contribution from Azucarera, which was acquired in April 2009, but also due to string growth in the UK and from cane sugar in China.
This sales growth, together with an improvement in UK and Chinese margins, helped to deliver a 43% leap in profits.
Meanwhile, the glasshouse adjacent to British Sugar’s Wissington sugar factory is being expanded by 70% to become the UK's largest tomato nursery.
City reaction
Panmure Gordon analyst Graham Jones, who had pencilled in a pre-tax profit figure of £816m, said the results were “hugely impressive”, adding: “2010 was an excellent year for ABF. For 2011, we have raised our earnings per share forecast by 2.3% from 74.3p to 76p.”
Investec Securities analyst Martin Deboo said ABF was “investing wisely and positioning itself robustly across its major businesses".
He added: “Divisional results were all slightly ahead of our expectations. The sugars results read well to us, with strong performance in the UK and a recovery in China offsetting weaker performance in Iberia and Ilovo driven by difficult climatic conditions.”